United Arab Emirates Listed Insurers’ Strong 2017 Midyear Results Driven By New Regulations, Says Report

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S&P Global Ratings said that UAE publically listed insurers posted strong growth in gross premiums written (GPW) and net profits in the first half of 2017, exceeding its expectations, in a report published titled “United Arab Emirates Listed Insurers’ Strong 2017 Midyear Results Propelled By Regulatory Change.”

“We believe this growth can be largely attributed to two key regulatory initiatives,” explains S&P Global Ratings credit analyst Emir Mujkic, “namely, rate increases in motor insurance, which are the result of a new unified motor policy that the UAE Insurance Authority introduced in January 2017, and the final stage in the implementation of compulsory medical insurance in Dubai, which has increased the number of policyholders under this scheme.”  The significant increase in underwriting profitably, particularly in the takaful sector, has also had a positive impact on the market’s total net  profits. The focus on better net underwriting results comes at a time when  investment returns continue to decline. “That said, despite lower investment results, we note that investment returns still play an important part in the  overall earnings composition of listed insurers in the UAE,” adds Mr. Mujkic.

While GPW and net income showed strong growth in the first six months of 2017, total growth in shareholders’ equity remained relatively flat. Strong premiums growth, combined with unevenly distributed profits, is increasingly putting pressure on the capital buffers of some weaker capitalized insurers in the  market. “However, apart from some individual exceptions, we expect overall credit conditions in the UAE insurance sector to remain stable over the next 12 months.”